Getting a notice of foreclosure on your home in the mail isn’t something that any homeowner wants to happen. For millions of homeowners in the country, that is a sad reality. While some homeowners are able to secure loan modifications and other arrangements from the mortgage holder that will allow them to remain in their home, that isn’t always the case. For some homeowners facing foreclosure, filing bankruptcy is the only way to keep their home.
Filling bankruptcy provides the homeowner a temporary reprieve from the foreclosure proceedings. When the homeowner files for bankruptcy, an automatic stay is issued that will stop foreclosure proceedings as the bankruptcy case progresses. That, however, doesn’t mean that bankruptcy isn’t a powerful tool for a homeowner who is facing foreclosure.
For people with a regular income, filing Chapter 13 bankruptcy may freeze the foreclosure process as long as the payments are being made as they should. While this will take up a large chunk of the family’s income, it is an effective tool to stop foreclosure. This bankruptcy simply restructures the debts listed in the bankruptcy.
For low income families or those without a lot of assets, filing Chapter 7 bankruptcy provides a temporary halt of the foreclosure proceedings. This bankruptcy liquidates all unsecured debts.
In some cases, filing bankruptcy gives the homeowner enough time to get a mortgage modification from the mortgage lender. At any point during the bankruptcy, the mortgage lender can offer to work with the homeowner to lower their payments with a mortgage modification.
Anyone who is facing foreclosure needs to learn his or her options as early in the process as possible. Understanding these options can help Florida homeowners to determine the best way to stop foreclosure and keep their home.
Source: Huffington Post, “Bankruptcy: The Foreclosure Kill Switch” Jorge Newbery, Apr. 22, 2014